HONG KONG, Dec 13 (Reuters) - Hong Kong shares retreated
from a 16-month high on Thursday as concern over the U.S.
"fiscal cliff" and a weak day on mainland markets triggered
profit-taking after the recent rally.

On the mainland, the CSI300 fell 1.1 percent while
the Shanghai Composite closed down 1.0 percent with
large-cap energy and banking shares the biggest drags.

Utilities were weak in Hong Kong, led by a 3.6 percent drop
for CLP Holdings after it raised $982 million in new
shares to fund expansion. Power Assets fell 1.4
percent while China Resources Power dropped 4.2
percent and was the day's worst performing Hang Seng component.

Corporates and investors have taken advantage of the recent
rally in Hong Kong to sell shares in the open market.

Shares of property firm Kaisa Holdings fell 5.8
percent after private equity firm Carlyle Group said it
was selling up to $67 million of stock in the company.

In Hong Kong, investors are still fretting about the U.S.
political stand-off.

"If there's some bad news about the fiscal cliff, then yes,
you will probably see a pull back," said David Gaud, a senior
portfolio manager at Edmond de Rothschild Asset Management in
Hong Kong, referring to the Hang Seng.

But he added that China is looking increasingly attractive.

"The earnings momentum is probably strengthening and for the
first time in nearly two years in China we may start to get some
positive surprises," said Gaud.

On the mainland, investors locked in some profits after
China's indexes hit one-month highs earlier this week.

ICBC fell 1.3 percent and was the biggest drag
on the CSI300 followed by a 0.6 percent slide for Petrochina
.

China's domestic markets are poised for their third straight
annual loss this year although there is increasing bullishness
about the market's prospects next year.

HSBC maintained its "overweight" view on China but cut its
rating on Hong Kong to "underweight" from "neutral", citing
valuations.

"The most obvious value market in Asia is China," said
Herald van der Linde, head of equity strategy, Asia-Pacific at
HSBC. At 9.7 times forward price-to-earnings, China is Asia's
second-cheapest market after Korea, according to the broker.

HSBC is forecasting that the Shanghai Composite will be at
2,500 at the end of 2013, a rise of 21 percent from where it
ended on Thursday.